Stefani Company has gathered the following information about its product. Direct

Question

Stefani Company has gathered the following information about its product.

Direct materials: Each unit of product contains 4.30 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.80 pounds. Materials cost $4 per pound, but Stefani always takes the 1.00% cash discount all of its suppliers offer. Freight costs average $0.35 per pound.

Direct labor. Each unit requires 1.70 hours of labor. Setup, cleanup, and downtime average 0.10 hours per unit. The average hourly pay rate of Stefani’s employees is $12.20. Payroll taxes and fringe benefits are an additional $3.50 per hour.

Manufacturing overhead. Overhead is applied at a rate of $4.60 per direct labor hour.

Compute Stefani’s total standard cost per unit. (Round answer to 2 decimal places, e.g. 1.25.)

Explanation / Answer

(pounds) Direct materials/unit of output 4.3 Allowance for normal wastage/unit 0.8 Total material reqd./unit of output 5.1 Cost @ $ 4 per pound Less 1% discount ie.(4*0.99)                                                            $ 3.96 Add: Average Freight cost/unit                        $ 0.35 Material cost /pound                                            $ 4.31 Total standard material cost/unit of output (5.1*4.31) 21.98 Direct Labour (Hrs.) Direct labour hrs./unit of output 1.7 Av.Setup, cleanup, and downtime /unit 0.1 Total labour hrs.reqd./unit of output 1.8 Hourly rate 12.2 Add: Payroll taxes & fringe benefits/hr. 3.5 Labour cost/hr. 15.7 Total standard labour cost/unit of output (15.7*1.8) 28.26 Manufacturing OH applied / unit of output      @ 4.60 for 1.8 hrs. 8.28 Stefani’s total standard cost per unit 58.52 ie.   $   58.52

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